In our 2004 and 2007 audits, we notified District management of these requirements, and in our audit of fiscal year 2008 we reported noncompliance with federal procurement requirements. These conditions have not been resolved.
These are grants for Special Education, Native American programs, and others. Some of the issue is that the district is not going out and getting bids or proposals from multiple vendors as is required and don't have records to support claims of doing so. From the audit:
Special Education: We examined eight personal service contracts totaling $1,172,328 charged to Special Education grants. The District could not provide documentation to show these contracts were competitively procured. District staff stated they considered the contracts sole source, but did not have documentation to show how the District reached that conclusion.
Indian Education: We examined two personal service contracts totaling $14,603 charged to the Indian Education grant. The District could not provide documentation to show the contracts were competitively procured. District staff stated they considered the contracts sole source, but did not have documentation to show how the District reached that conclusion.
Head Start: We examined four personal service contracts totaling $217,982 charged to the Head Start grant. The District could not provide documentation to show these contracts were competitively procured. District staff stated they considered the contracts sole source, but did not have documentation to show how the District reached that conclusion.
Title I: We examined six personal service contracts totaling $175,998 charged to the Title I grant for private tutoring services. The District could not provide documentation showing these contracts were competitively procured. District staff stated they considered the contracts sole source, but did not have documentation to show how the District reached that conclusion.
Cause of Condition
District staff was unaware of federal requirements related to procurement. The District also did not follow previous audit recommendations.
Effect of Condition
By not complying with federal procurement requirements, the District cannot ensure contracts paid with federal funds are awarded to the lowest responsible bidder. By not retaining appropriate supporting documentation, the District cannot demonstrate other providers were unable to supply the necessary personal services before it selected vendors. Therefore, it is possible other providers were not provided an opportunity to compete for these contracts, which can affect contract price and quality of service.
But again, how many years before the district has a streamlined and efficient method of operating? It almost seems like they got frozen in time at some point and are continually struggling to keep up.
Brief Overview of each Finding
Indian Education Grant - The District claimed 1,123 in its 2008-2009 grant application and received $233,792. In 2007, the U.S. Department of ed found that the district's number of eligibility forms on file did not match the number of students counted. The district provided 927 eligibility forms but only 377 were valid. There was also a finding that they did not created the parent committee required by the grant, a finding initially discovered in 2007.
Special Education (IDEA)
This is for a Safety Net award. The district received about $460K in 2008-2009 but there were two students who left the district but the district kept the money. The district claimed it thought that OSPI automatically changed the grant amount if a student withdrew from the district.
The district had one paraprofessional who did not meet the highly qualified requirement. The district did report this to OSPI. (The employee had earned $31,455 during 2008-2009.) The district said it wasn't aware of the requirement and thought this employee was providing services not related to Title 1. An additional finding was that the district had 73 teachers who did not meeting the highly qualified teacher requirements (but none of them taught Title 1 classes). This one seems like a genuine human error on the district's part and not a big deal. The odd thing is that the reason it occurred is that a teacher resigned and they put in an IA instead of a teacher.
Education State Grants
These are grants to boost funding from K- college. The district had received a one-time sum of $19.8M in 2009. Of that, $12.5M was spent on salaries and $4.1M on benefits. The district had put in a new payroll system in 2008. Apparently this new system can't detect overpayments to employees funded by these grants. Because of this, the Auditor was unable to determine how many employees were overpaid so how much was lost here is unknown. They were only able to identify one employee who was overpaid by $40K (and the charge to the grant was $8k). A Special Report will be issued later this year on district's salary overpayments. (The cause here of the overpayments?
When it switched to the new system, District staff members manually entered employee pay codes into the new system. No one did a review to ensure they were correct. Therefore, the District’s controls were insufficient to detect and correct errors in a timely manner.
Internal Controls in Accounting
This one is pretty troubling.
District staff members did not have adequate knowledge of and experience with prescribed financial reporting requirements. Staff did not use the Accounting Manual for Public School Districts in the State of Washington for guidance and information related to capital asset transactions, and recorded them incorrectly.
In fiscal year 2009, the District processed more than $330 million in payroll. We noted that when District changed its payroll system in 2008, it did not update its internal controls to address the increased risks of error or inappropriate entries related to manual data entry. Therefore, the District’s controls over this payroll
Financial statement preparation
District management is responsible for ensuring annual financial reports are accurate, complete, and comply with reporting requirements. However, the District relies on our audit to identify errors in the financial statements and notes, rather than dedicating the necessary staff time, training and other resources to ensure annual financial reports are accurate and complete.
During the payroll system conversion, District staff members manually entered employee pay codes into the new system. No one reviewed these to ensure individual pay rates were the rates shown in the signed employee contracts.
The effects of this lack of oversight are that buildings were reported as "equipment". Salaries and benefits for General Fund were reported int he Capital Projects Funds. Capital accounts payable of $1.6M were in the General Fund. The district also overstated its total unreserved,undesignated fund balance. For Payroll,
At least 150 employees were paid at a higher placement on the pay scale than their contracts supported. Thus far, a total of $335,000 has been identified as overpaid. This is the result of a systemic issue.
The district admits fault in every case but this isn't the first time for many of these issues that they have been told that they are not in compliance. That the Auditor's office thinks the district is relying on the state audits to find their mistakes rather than doing it themselves is troubling.